Can We Avoid Another Financial Crisis? by Steve Keen

Author:Steve Keen
Language: eng
Format: epub, pdf
ISBN: 9781509513765
Publisher: Wiley
Published: 2017-05-11T00:00:00+00:00

Figure 13. Japanese asset prices crashed when its debt-fuelled Bubble Economy ended

Crucially for the many countries that have since emulated Japan’s pattern of a Bubble Economy followed by a crisis, private debt in Japan stabilised at a still-high level after the crisis, and demand from credit terminated. When credit stopped growing, so did Japan. The Japanese economy failed to revive after the crisis because, with the level of debt already so high, there was precious little appetite for a return to debt growth, and precious little capacity to borrow more either – even with reserve interest rates of zero. With credit either falling or negative, a vital source of demand in the Japanese economy disappeared, while every attempt to reduce debt by conventional means – by debt repayment or bankruptcy – reduced expenditure by as much, leaving the ratio of private debt to GDP stuck at a debilitatingly high level.

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